Japanese Business Management

Restructuring for Low Growth and Globalisation

Harukiyo Hasegawa, Glenn D. Hook

• Publisher: Routledge
• Year: 2002
• Print ISBN: 9780415172561
• eBook ISBN: 9781134691982
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

In this study the views of Japan's leading experts on the globalization of Japanese business, management and industrial relations explain how traditional Japanese-style management is responding to the changes following the collapse of the bubble economy. The areas covered include the changes made in management itself inside Japan and also how it is adapting itself when transferred overseas. The book demonstrates how management is moving towards a hybrid type in overseas operations and towards a western-style in Japan, where contractual principles are beginning to be given greater weight.

Part I

Japanese business in globalization processes

1 Japanese business in triadic regionalization

Glenn D. Hook

This chapter seeks to provide an overview of Japanese business in the triadic regions of the global economy, North America, Europe, and East Asia. The three chapters to follow in Part I deal separately with issues of Japanese business management in these three core regions, whereas my aim here is to focus more generally upon how Japanese business is embracing triadic regionalization, especially in the ‘post-bubble economy’¹ of the 1990s. The chapter has four main purposes: first, to show that, despite predictions of the global economy dividing into three blocs, Japan has embraced interregionalization, not just East Asian regionalization. In other words, the Japanese economy is embedded in a complex web of economic interconnectedness in the three core regions of the globe, suggesting that interregionalization as well as regionalization are integral to Japanese trade strategies. Second, to outline how, in responding to the pressures of globalization and regionalization, Japanese business has developed a triadic investment strategy. This is manifested clearly in the patterns of investment pursued by key Japanese manufacturers in North America, Europe, and East Asia. Third, to indicate that, in pursuing a strategy of exporting manufactures and boosting foreign investment, Japanese companies have set in motion a dual transformation, at home as well as abroad. Specifically, changes in the domestic political economy are linked intricately to the movement of Japanese manufacturers abroad, not least in cost-cutting and other changes within companies and the ‘hollowing out’ of industries. These points will be dealt with in greater detail in some of the later chapters of the book. Finally, to highlight how, with the bursting of the Japanese economic bubble, trade, investment and production patterns now differ considerably from the 1980s, when the Plaza Accord² pushed Japanese companies to invest in the advanced economies. The focus now is increasingly on East Asia.

In essence, then, the two predominant trends in the world political economy, globalization and regionalization, are reshaping profoundly the political economy of Japan. The quantitative increases in economic interconnectedness, as manifested in the complex patterns of cross-border trade, finance, and production, highlight the salient features of economic globalization. This growth in quantity implies a qualitative change in the degree of cross-regional economic links at the heart of globalization. In this sense, interregionalization is a part of globalization, too. At the same time as globalization is transforming the Japanese political economy, however, a concomitant trend towards regionalization is boosting intraregional interconnectedness, as with the deepening and widening of the European Union (EU), and the emergence of new regional institutional frameworks in the form of the North American Free Trade Agreement (NAFTA), Asia–Pacific Economic Cooperation (APEC), Association of South East Asian Nations (ASEAN) Free Trade Area (AFTA), and others. As a result, economic interconnectedness at the regional level is similarly shaping the political economy of Japan. In some quarters, the triadic regionalism at the heart of regionalization in Europe, the Americas and East Asia is painted in the alarmist pictures of a world dividing into competing regional blocs, but the complex interweaving of the dual trends towards both globalization and regionalization draws our attention to how, in the emerging world order, the links between as well as within the three core regions of the global economy need to be taken into account (Gamble and Payne 1996). For these reasons, the role of Japanese business in both globalization and regionalization will be examined below, with the emphasis being placed on the issues of trade and investment in the 1980s and 1990s. The historical developments shaping the Japanese response to globalization and regionalization, although important, have been addressed elsewhere (see Hook 1996).

TRIADIC TRADE RELATIONS

The globalization and regionalization of Japanese business can be understood by reference to trade, foreign direct investment (FDI) and the ratio of production and other economic activities carried out beyond the shores of Japan. To start with trade, Japan has established itself as the paramount mercantilist state through maximizing the export of manufactured products, especially consumer durables, while minimizing the import of foreign manufactures. The three core regions of the global economy account for the overwhelming proportion of both Japanese exports and imports, with East Asia³ accounting for an increasing ratio in the 1990s. As a share of total dollar-based exports in 1995, the USA accounted for 27.3 per cent, EU 15.9 per cent, and East Asia 42.2 per cent, made up of NIEs (Hong Kong, Singapore, South Korea, Taiwan) 25.1 per cent, ASEAN 4 (Indonesia, Malaysia, Philippines, Thailand) 12.1 per cent, and China 5.0 per cent. As a share of total dollar-based imports in 1995, the USA accounted for 22.4 per cent, EU 14.5 per cent, and East Asia 34.4 per cent, made up of NIEs 12.3 per cent, ASEAN 4 11.4 per cent, and China 10.7 per cent. In this way, the triadic political economy in 1995 accounted for just over 85 per cent of Japanese exports and just over 70 per cent of imports on a dollar-based value, suggesting the degree to which Japan is embedded triadically in the global economy. The strengthening of this trend from the mid-1980s onwards can be seen from Figures 1.1 and 1.2.

The Japanese trade relationship with the USA is central to our understanding of the globalization and regionalization of the Japanese political economy. The trade surpluses with the USA, which frequently have led to the politicization of bilateral economic issues, have spurred Japanese government and industry to introduce a variety of measures in response. After a decline in the late 1980s, the surplus rose again between 1991–4, but then registered a decline in 1995 to $45.5 billion, reflecting the changing nature of the bilateral trade relationship. In 1995 imports from the USA, led by semiconductors and automobiles, registered a 20.3 per cent increase over 1994. In the case of Japanese exports to the USA, however, the increase was only 2.8 per cent, with capital goods registering a 2.3 per cent increase over 1994 (figures from MITI 1996: 18). Despite this, with the rise in the value of the dollar against the yen in 1996, Japanese exports to the USA of automobiles and other manufactures can be expected to rise again, boosting the surplus. The 1995 figures point to the success achieved by the USA in penetrating the Japanese market, as in the case of semiconductors, albeit in the context of the politicization of economic issues and the setting of numerical targets.⁴

Figure 1.1 Trends in Japanese exports (US$ billion)

Source: Figures from Ministry of Finance, reproduced from Imidasu 97: 101

Figure 1.2 Trends in Japanese imports (US$ billion)

Source: Figures from Ministry of Finance, reproduced from Imidasu 97: 101

Indeed, Japanese exports to the United States of especially automobiles, electronics and other consumer durables have given rise to numerous bilateral trade conflicts. Thus, in the face of US political pressure, manifest in a range of so-called jishu kisei (voluntary export restraints, VERs) and result-oriented agreements, Japanese exports have been restricted and imports from the USA boosted. The economic conflicts between the two have become more complex as time has passed, but have been basically of four different types (Kusano 1996: 73–6). The first major source of conflict has been Japanese exports to the USA. Whether colour televisions and steel in the 1970s, automobiles and machine tools in the 1980s, or semiconductors and auto-parts in the 1990s, the politicization of trade issues has led to export restraints being imposed on Japan. In response, Japanese business has moved production facilities offshore, both to North America and to East Asia, where ‘launch platforms’ for export to the North American market have been created. A second major conflict has been over the closed nature of the Japanese market, ranging from resistance to opening up the agricultural sector, as in the cases of citrus fruits and rice; the service sector, as with finance and insurance; and the industrial sector, as illustrated by semiconductors and pharmaceutical products. The third type of conflict has arisen as a result of investments in the USA. These conflicts became especially salient in the late 1980s, when Japanese investors bought US real estate and companies, including such high-profile acquisitions as Sony’s purchase of Columbia. Finally, in the late 1980s conflict arose over structural features of Japanese society and political economy, with the distribution system, corporate cross-shareholding, the balance between savings and investment, and so on, being subject to attack. This culminated in the 1989 Structural Impediments Initiative,⁵ through which the USA sought to penetrate the Japanese market. In this way, the politicization of economic issues and activities, and the processes set in motion by the Japanese response to US pressures, brought about fundamental changes in both the domestic political economy and the global and regional roles of Japanese business.

Similarly, trade surpluses with the European Union (European Community) have led to the politicization of Euro-Japanese economic relations, with Japan being subject to a whole range of pressures by both the members and the Commission. The surplus enjoyed by Japan in the 1980s registered a fall at the end of the decade, but rose again in 1991 and 1992. It has been thenceforth in decline, however, with the surplus in 1995 dropping to $21.5 billion, again reflecting the changing nature of the trade relationship. In 1995 imports from the EU12 were led by machinery, especially automobiles, which registered a 36.9 per cent increase over 1994. In the case of Japanese exports to the EU, general machinery exports increased, but a marked decrease occurred in the export of automobiles, which dropped to 12.4 per cent in 1995, compared with 18.2 per cent in 1988 (MITI 1996: 23–4). The 1995 figures are testimony to the increasing success of European automakers, especially the German BMW, in gaining access to the Japanese market as well as a reflection of autogiants like Nissan and Toyota moving autoproduction to Europe.

As with the USA, a number of economic conflicts have arisen between Japan and the EU, with the bilateral relationship between the two being dominated by trade issues in the 1970s and 1980s. The conflicts over automobiles, colour televisions, video recorders, pharmaceuticals, and so on, were typical. However, without the US–Japan Security Treaty,⁶ which has served as a lever for the USA in exerting pressure on Japan in trade negotiations, along with difficulties arising out of differences among EU members as well as between members and the Commission, Europe often has been in a weaker negotiating position than the USA.⁷ Despite this, national governments and the Commission have followed the American lead in attempting to deal with made-in-Japans through VERs and antidumping legislation. In the case of automobiles, for instance, the threat of protectionist measures by the British government in 1978 led the Japanese auto-makers to restrict exports to below 10 per cent of the market. Similar restrictions on auto-exports also were agreed with other European countries. By 1986 VERs had been instituted on a European Community-wide basis, with manufacturers holding growth to around 10 per cent, with further restrictions, which remain in force until 1999, being imposed in 1991. Similar types of VERs have been placed on the export of electronics products. One of the most notorious cases is the French attempt in the early 1980s to restrict Japanese exports of video-cassette recorders (VCRs) by the use of a variety of tactics, such as requiring documentation related to the exports to be prepared in the French language and using a small number of customs officers in the provinces to deal with custom clearance. In the end, as in the case of automobiles, VCRs became subject to an EC-wide VER agreement in 1983 (for details, see Hosoya 1989).

Nevertheless, these bilateral negotiations at the national and Commission levels have not prevented the Japanese government from appealing to international mechanisms in order to try to resolve bilateral issues. This is the case with the government’s 1988 decision to take the EC to the General Agreement on Trade and Tariffs over so-called ‘screwdriver plants’. Indeed, in 1990 Japan won the case it had brought against the 1987 EC Council decision to regulate these plants, which imposed a limit of 60 per cent as the ratio of components originating from Japan in assembly plants in the EC. Even now, however, local content is influenced by the European Community Rules on Origin. In this way, trade conflicts between Japan and Europe have been dealt with through both multilateral and bilateral measures, although the movement of production facilities to Europe has been one of the major ways for Japan to deal with the conflicts.

In the case of trade links with East Asia, the pressure brought to bear on Japan as a result of the trade surplus with the USA and the EU cannot be matched by the East Asian governments, despite the nation’s larger surpluses, as their economies are enmeshed in a subordinate web of economic relationships in comparison with the economies of the other two legs of the triad. The...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Preface
• List of abbreviations
• Glossary
• Introduction
• Part I Japanese business in globalization processes
• Part II Restructuring in management
• Part III Restructuring in labour
• Index